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According to a report by global real estate consultancy Knight Frank, substantial international investments are happening in Africa. The $2 billion commitment to sustainable projects by the UK and the U.S.’s $200 billion initiative known as the Partnership for Global Infrastructure and Investment (PGII), are poised to have a considerable influence on Africa’s real estate sector.
Over the past ten years, Gulf Cooperation Council (GCC) nations have also invested heavily in African countries, with the UAE leading with $59.4 billion in investments, followed by Saudi Arabia with $25.6 billion, and contributions from Qatar, Kuwait, and Bahrain totalling $16.4 billion. Additionally, the report indicates that Middle East sovereign wealth funds are preparing to invest around $120 billion in Egypt in the near future. These initiatives are expected to attract MNCs to major urban centres in Egypt, such as Lagos, Nairobi, Cairo, Johannesburg, and Accra.
Africa’s real estate sector is poised to benefit from the unlocking of investment opportunities in five key areas: data centres, manufacturing, ESG (Environmental, Social, Governance), infrastructure, and agro-processing.
Boniface Abudho, an Africa Research Analyst at Knight Frank, says that the data centre market in Africa, which was valued at $2 billion in 2020, is projected to reach $5 billion by 2026, with a compound annual growth rate (CAGR) of 15% from 2020 to 2026. The data centre Industry in Africa has piqued the interest of major global technology companies, large e-commerce players, and online retailers. Institutional investors are also making substantial investments in Africa’s data centre market, like Digital Realty’s acquisition of Terraco for $3.5 billion.
Africa’s potential for industrialization is gaining attention, considering that the sector currently contributes only an average of 11% to the overall GDP, and in most countries in Africa, it’s even less than 5%.
The agro-processing industry in Africa holds great promise due to lack of agro-processing at the rural level. Africa faces significant post-harvest losses, with 35-50% of fruits and 15-25% of grains going to waste. There is an increase in demand for value-added agricultural products fueled by the growth of urban areas, expansion in the agriculture sector, and the diversification of crops.
Among specific countries in Africa, Egypt stands out as a leader in North Africa in terms of foreign direct investment (FDI), attracting an impressive $11.4 billion in 2022, as reported by UNCTAD data. This achievement is attributed to the Egyptian government’s swift implementation of comprehensive economic measures following the pandemic. South Africa also experienced a doubling of its average FDI, securing $9.1 billion in 2022, thanks to its effective economic policies, advanced capital markets, and strong financial services.
The report also underscores Morocco’s potential, citing its varied economic landscape, a recovering agricultural sector, and a relatively stable political system. The African Development Bank (AfDB) predicts a 3.3 percent growth in GDP for 2023-24.
The report also highlights several other economies: Rwanda having an impressive 8.2 percent growth rate in 2022. Ghana which has extended its focus beyond traditional sectors by venturing into digital innovation and financial services. Kenya is evolving into a crucial hub for economic, commercial, financial, and logistical activities by making significant progress in the technology sector. Tanzania, where government-led investments in energy, telecommunications, and finance, along with a projected GDP growth of 5.7 percent in 2023, have attracted the interest of investors.
In conclusion, with a predicted GDP growth rate of 3.3% for 2023-24, Africa's economic landscape is evolving positively, offering numerous opportunities for growth and development in the coming years. Africa's real estate sector is poised for substantial growth driven by significant international investments.
This story was earlier published by Realty Plus
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